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Solution 2 - Exchange(ASC as a public company to gain...

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Solutions for Tutorial 2 1.1 The two basic sources of funds for all businesses are debt and equity. 1.4 Financial managers are most concerned about the capital budgeting decision, the financing decision, and the working capital decision. 1.5 A company should undertake a capital project only if the value of its future cash flows exceeds the cost of the project. 1.6 Capital structure shows how a company is financed; it is the mix of debt and equity on the liability side of the balance sheet. It is important as it affects the risk and the value of the company. In general, companies with higher debt-to- equity proportions are riskier because debt comes with legal obligations to pay periodic payments to creditors and to repay the principal at the end. 1.13 A company can list on securities exchange, such as the Australian Securities
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Unformatted text preview: Exchange (ASC) as a public company to gain access to the public markets. 1.17 The appropriate goal of financial managers should be to maximise the current value of the company’s share price. Managers’ decisions affect the share price in many ways as the value of the share is determined by the future cash flows the company can generate. Managers can affect the cash flows by, for example, selecting what products or services to produce, what type of assets to purchase, or what advertising campaign to undertake. 1.22 Business dishonesty and lack of transparency lead to corruption, which in turn creates inefficiencies in an economy, inhibits the growth of capital markets, and slows the rate of economic growth....
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